Your coffee break investment plan
Day 1: What is investing?
Many of us think of an ‘investment’ purchase such as a handbag. Or we think of our savings in the bank. Both of these are wrong. We explain the difference between investing and saving.
Day 2: What is the stock market?
We all probably have some exposure via our pension funds. What is it? Is it risky? Is it complicated? Why does it go up and down? What returns can I expect? Will I lose my money? Here are the key things that you need to know.
Day 3: Setting investment goals
You need a plan. What are you investing for? When will you need the money? How much will you need? Why does this matter? We explain why investment needs to relate to your lifestyle and life plan. We also explain why investors are usually best advised to invest a regular amount every month.
Day 4: The two enemies of investors: Inflation and tax
We explain the basics of inflation and why tax is such an issue for investors. Plus, how to beat tax by holding your investments in an Isa or pension.
Day 5: The importance of keeping charges low
We illustrate with examples the importance of keeping investment charges as low as possible. Plus, how to buy your investments cheaply.
Day 6: Having a range of eggs in your basket
Investors need to split their assets between different types of investments called equities, bonds, property, commodities and cash. This is called asset allocation and is related to your attitude to risk as some assets are riskier than others. We give an example of a diversified portfolio and how the asset allocation might change over your lifetime.
Day 7: Finding your way around funds
We explain the different types of investment funds: active and passive. Open-ended, closed-ended and exchange traded funds.
Day 8: Are you ready for company shares?
Many investors avoid funds altogether and start buying company shares straight away. This is fine too. We explain the key things to think about when building a portfolio of shares.
Day 9: Four simple ways to get started
Investing doesn’t have to be complicated. We give four examples of simple investments to start your portfolio, whether you’re going to be making regular savings or investing a lump sum.
Day 10: Tips from the world’s best investors
Some inspiration. The investment quotes that you really need to know and what they mean.
The term is interchangeable with stock exchange, and is a market that deals in securities where market forces determine the price of securities traded. Stockmarket can refer to a specific exchange in a specific country (such as the London Stock Exchange) or the combined global stockmarkets as a single entity. The first stockmarket was established in Amsterdam in 1602 and the first British stock exchange was founded in 1698.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).
A term applied to raw materials (gold, oil) and foodstuffs (wheat, pork bellies) traded on exchanges throughout the world. Since no one really wants to transport all those heavy materials, what is actually traded are commodities futures contracts or options. These are agreements to buy or sell at an agreed price on a specific date. Because commodity prices are volatile, investing in futures is certainly not for the casual investor.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).